Sunday’s San Diego Union Tribune (“Doctors object to ultimatum on health care: Sharp wants every senior on one plan“) had an interesting article on Sharp’s decision to issue its physicians an ultimatum: either provides services exclusively for our patients or find work elsewhere. Let us look at this from a variety of perspectives.
Sharp is a non-profit organization, who is the largest health services provider in San Diego county. According to the Sharp website, the group has “four acute-care hospitals, five specialty hospitals and three medical groups plus a full spectrum of other facilities and services.” It also has $1.4 billion in revenue. The contracts Sharp was proposing for the doctors was a flat fee per patient regardless of the number of services provided. If these doctors were allowed to serve fee for service (FFS) patients in addition to Sharp’s capitation patients, the physician would have an incentive to provide care to the FFS patients and ignore Sharp patients. Care provided to the FFS patients increases a physicians profits while care provided to Sharp’s capitation patients only increases costs.
The physicians think this is a raw deal. First, they will lose a large portion of their clientèle if they choose to remain with Sharp. Secondly, if a large portion of their capitation patients become sick, they are not able to increase FFS volume to to makeup for lost income. Third, doctors are not actuaries and passing the financial risk for caring for patients to doctors is a recipe for disaster. Fourth, Sharp has significant market power in the San Diego area. Sharp’s Secure Horizons senior plan pays physicians only $44/patient per month, while Health Net Seniority Plus pays doctors $110/patient per month.
In the short term, this will certainly cause problems. Many elderly patients will need to change doctors and may have to commute longer distances (although Sharp did offer “20 free one way trips to Sharp providers” among those who have to switch plans). In the long term, the industry consolidation may help to reduce price. Sharp’s decision to create an integrated IT network should increase efficiency and quality.
I think what you are seeing is a reigning in of costs in order to keep premiums down. Physician and patient choice may suffer, but the costs to elderly San Diegan residents should decrease.